1031 Exchange Financing

If you own an investment property and are considering selling it, a 1031 exchange is a way to avoid getting taxed on your capital gains. A 1031 exchange or 1031 tax-deferred exchange allows the owner of an investment property to sell it and buy like-kind property while deferring capital gains tax. Read more below to understand how a 1031 exchange works and the guidelines.

If you are approaching the 180 day deadline to close escrow on your new property then a bridge loan may be a good option to consider. To learn more about 1031 exchanges and how bridge loans can help you close your real estate transaction quickly please read below.

Apply for a Bridge Loan

Get started by completing the form below and an associate will reach out to get your loan details

Hard Money Lenders (Home) » 1031 Exchange

What is a 1031 Exchange?

A 1031 Exchange is an IRS approved process where like-kind business or investment properties are exchanged without immediate tax liability to the property owner. The IRS has set out strict time deadlines for 1031 exchanges – no exceptions:

  1. You are required to complete the exchange within 180 days.
  2. You must provide the IRS with 3 property purchase options within 45 days of beginning the exchange process to determine eligibility.
  3. Once eligibility is determined, you can proceed with purchasing the property, mindful of the 180 day timeline.

Given the strict time deadlines associated with 1031 exchanges, obtaining a bridge loan from a hard money lender can be a way to close quickly on a property to ensure closing before the exchange deadline. Bridge lenders typically close loans in a few weeks as opposed to traditional lending institutions that could take up to a few months. Wilshire Quinn funds loan in 5-7 days. Hard money lenders give you the flexibility to close deals fast, allowing you to manage your exchange deadline time with less stress.

1031 Exchange financing

Who qualifies for a 1031 Exchange?

According to the IRS, owners of investment and business properties may qualify for a Section 1031 deferral. Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.

What qualifies the property for a 1031 Exchange?

The property being sold and the replacement property(ies) must meet certain requirements to be eligible for a 1031 exchange.

  1. Primary residence not eligible. The properties must be for business purpose or investment properties. A primary residence or vacation home is not eligible.
  2. The properties must be “like-kind” or similar. Most real estate will be considered like-kind to other real estate. Quality is not a consideration. It can even be a building being replaced by vacant land. An exception to this is property outside the United States.

Timeline for a 1031 Exchange

A 1031 Exchange does not have to be done simultaneously, but it does have to meet 2 very strict time limits. The fist limit is 45 days from the start. The clock starts on your timeline the day escrow closes on the sale of your property. You must identify potential replacement properties within these 45 days. The replacement properties must be identified clearly in written correspondence. This includes a legal description, street address or distinguishable name.
The second time limit is the 180 day limit. The replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier.

Benefits of a 1031 Exchange

Example #1 – Cash Out

Brad is the owner of a 5 unit apartment complex in San Diego, CA. He bought the investment property 20 years ago for $1,000,000, putting $250,000 down and financing $750,000. Now the property is worth $2,000,000. Given that the property has increased in value 2 times its worth 20 years ago, Brad decides he wants to sell the property. He still owes $500,000 on his mortgage and will pay a tax rate of 30%.

Original Purchase 20 years ago

Original Mortgage $750,000
Original Cash Down $250,000
Original Purchase Price $1,000,000

Theoretical Sale Today

Sales Price $2,000,000
Mortgage Payoff ($500,000)
Net Proceeds $1,500,000
Capital Gains $1,000,000
Approximate All-In Tax Rate 30%
Approximate Tax Bill ($300,000)

Example #2 – Brad does a 1031 Exchange

Brad realizes that he will be losing 30% ($300,000) of his net profits to taxes if he takes the cash. He decides to do a 1031 exchange to defer taxation on his capital gains and preserve his wealth. To get the full tax benefit, he will need to invest the entire $2,000,000 into another property. Since he has an existing mortgage of $500,000, he will either need to come in with $500,000 cash or get a new mortgage for $500,000.

1031 Financing Summary

Net Proceeds From Sale $1,500,000
Purchase Price of New Property ($2,000,000)
Required Mortgage Amount $500,000

Brad gets a bridge loan to finance the additional $500,000 to defer 100% of the capital gains tax.

New Mortgage $500,000
Defered Taxes $300,0000

Bridge loans are typically funded within 5-7 days. Brad was able to use a bridge loan to purchase the replacement property within the 180 deadline and time to spare. By using a 1031 exchange to reinvest into a new property, he was able to defer taxation of $300,000 on his capital gains. A bridge loan assisted him in completing the transaction on-time without coming out of pocket.

* The information provided here is not meant to be considered as tax advice or legal advice, but for general discussion purposes only. Please do not rely on this information as authoritative. Please consult your attorney or tax professional for specific advice.

1031 Exchange Financing

Many investors use a bridge loan to successfully navigate through a 1031 exchange on-time.

If you are in the process of a 1031 Exchange and are running out of time, call us today to get a pre-approval. We can fund in as little as 5 days to help you close on your replacement property on-time. Borrow up to $20M for commercial & residential real estate.

Submit Loan Request

Here’s What Our Borrowers Are Saying

A Proven 1031 Exchange Bridge Loan Lender, Lending Nationwide

It was a pleasure working with the Wilshire Quinn Capital team. The loan process was easy and smooth from start to finish. Clear communication and more importantly, they executed exactly how they set the initial expectation. Wonderful job all the way around.
Garrett Garner
Garrett Garner
23:30 13 Dec 21
Chris Garcia and Emily Mesetz were great to work with. They were always quick to respond and had excellent follow-up.
Andrea King
Andrea King
23:32 11 Nov 21
Refi for a hotel in a global pandemic, was a unique challenge, Matt and the team at Wiltshire Quinn Capital stepped up. The story of the PattersonInn.com continues.
Chris Chiari
Chris Chiari
17:21 08 Oct 21
I could not be happier with the professionalism and efficiency of Matthew Mielke at Wilshire Quinn Capital. He helped get a unique deal to the finish line. There was clarity and consistency from start to finish.
Trey Sublette
Trey Sublette
17:57 07 Oct 21
Matt and Jeremy at Wilshire got the deal done when others turned my client down. Professional, quick and offered great terms for my client. I highly recommend running your next deal by them.
Mathieu Pollenz
Mathieu Pollenz
18:33 09 Jul 21
Wilshire Quinn came through when other lenders couldn't. They were extremely responsive and turned everything around very quickly. Loan terms were very reasonable for a short-term bridge loan.
David Marcin
David Marcin
01:08 22 May 21
i love the way the speed of closing went
elliot moore
elliot moore
16:17 06 Apr 21
I love this company! They are fast, easy, but most off all, they fund when they produce a Letter of Intent. Thank you "team close quick'!
Timothy Thomas
Timothy Thomas
16:24 16 Mar 21
My experience of dealing with Wilshire Quinn Capital has been nothing short of excellent service and top notch talent . My loan was funded on time
Frank Meram
Frank Meram
17:03 10 Dec 20
It was great working with Wilshire Quinn Capital in San Diego. Their team is professional and hardworking. I had a a wonderful experience working with them and would work with them in the future!
Kate Swann
Kate Swann
17:00 10 Dec 20
Wilshire Quinn was great to work with, from start to finish everything was seamless! Would highly recommend.
Donald Kaminski
Donald Kaminski
01:08 10 Dec 20
We had an excellent time communicating with the principals at Wilshire Quinn and performed as we wished and exceeded all expectations. Chris and his team were professional from the start and we will look forward to doing business with them again.
James E. Levin
James E. Levin
01:14 03 Dec 20
Had a client who's successful business was impacted by Covid19...as such, income had been negatively affected, and our normal A-paper borrower was in a pinch to qualify for property purchase.Wilshire Quinn came to the rescue, and helped us close the loan on time and with minimal hassle.Our rep Matt was very helpful; answered and/all questions without hesitation, and never made us feel stupid for asking and clarifying things we didn't understand, or that needed more information.Wilshire Quinn helped us out and I would be happy to recommend their services to a friend in need of hard-money and limited other options.
Jon Engelhardt
Jon Engelhardt
21:45 11 Nov 20
Very easy to work with as a mortgage broker. Protects their clients.
Luke R. Johnson
Luke R. Johnson
20:19 05 Nov 20
Wilshire Quinn Capital, Inc. is definitely great at their follow-up. Always pro-active trying to get deals done!
Alicia Gandy
Alicia Gandy
18:18 15 Oct 20
I was very happy with Wilshire Quinn Capital. The company was a great hard money lender. Communication was clear, responsiveness was quick and the process was very straightforward. They funded my loan quickly and I truly appreciate it.
Elena Vizvary
Elena Vizvary
22:36 16 Sep 20
Wilshire Quinn is a great hard money lender that funded our loan quickly. Very reliable and delivered 100%
Bill Janis
Bill Janis
21:46 03 Oct 19
Wilshire Quinn has been a lending agency I, We, have utilized for the past 5+ years. The integrity of the entire company is professional, and the process of each phase of the lending is complementary to all parties involved. I highly recommend their services; small or in large lending capacity.
HBGS Treasurer
HBGS Treasurer
22:10 28 May 19
It was a pleasure to work with Wilshire Quinn Capital, Inc. They are highly professional, knowledgeable, responsive and quick to return calls. I was most impressed with the turnaround and how quickly and conveniently the escrow check was disbursed. This is my second time working with Wilshire Quinn on mortgage financing and have never been disappointed. I will recommend Wilshire Quinn to every person I know who is in need of financing.
RishiRia Barkataki
RishiRia Barkataki
22:08 13 May 19
Wilshire Quinn is easy to work with, always accessible, always on top of it. Overall great experience
George Saunders
George Saunders
20:24 09 May 19
Wilshire Quinn Capital funded my unique loan in a timely manner and with the upmost of professionalism. Their experience helped guide me through the process.
Nelson Genteel
Nelson Genteel
23:30 07 May 19
Have been a Broker in CA since 1980 and have enjoyed working with Chris and his staff for many years,
Louis Steinberg
Louis Steinberg
17:11 07 May 19
Wilshire Quinn gave me a competitive quote and followed up with a quick, hassle-free escrow and closing. I am happy with their service and would recommend them to friends and business associates.
Ron Gerber
Ron Gerber
17:44 04 May 19
Great hard money lender.
Patrick Wight
Patrick Wight
21:11 03 May 19
The Wilshire Quinn team did an excellent job in a short time frame. I feel their rates and ‘products’ are competitive. Where I feel they distance themselves from the competitors is their commitment to customer satisfaction. Every project has challenges and they are dedicated to working with their clients to ensure satisfaction, which is not commonplace in the market these days.
242 Baldwin
242 Baldwin
22:00 02 May 19
This is a superb company to do business with.The customer service is always fast and accurate and gets the job done..When we needed help we had it in record time (three different times) to solve our financial needs...We can't say enough good things about doing business with Wilshire Quinn. Marvin and Arde Harris
Arde Harris
Arde Harris
16:16 17 May 18
Wilshire Quinn was extremely professional and they have the staff to make sure all issues are addressed quickly.
I’ve dealt with them for 3 years and I’ve always had a great experience. No one should have any reservations about working with them.
arnie rissman
arnie rissman
21:36 15 May 18
I'm not one to typically write reviews but I was so impressed with Wilshire Quinn Capital's service I felt it needed to be shared. I'm a mortgage broker and I recently referred a client to Wilshire Quinn who didn't qualify for any of our programs and needed to fund quickly on a house. I spoke with Matt Mielke and he was not only able to provide a great loan for the client but funded it with time to spare! The client thanked me for connecting him with Matt and as that was the only way he could finance his dream home. It was nice to be able to refer a hard money lender that did what he said he was going to do. I highly recommend Wilshire Quinn Capital for any hard money lending.
Travis Smith
Travis Smith
20:45 21 Mar 18
The best!! They are trustworthy and professional. I highly recommend!!
Dan Fulkerson
Dan Fulkerson
23:26 19 Mar 18
js_loader

Recently Funded Hard Money Loans

San Diego Hard Money Lender
LOS ANGELES, CA

Loan Amount: $16,025,000
Loan Type: Blanket Refinance
Property Type: Hospitality
Loan-To-Value: 43%
Term: 12 Months

San Diego Hard Money Lender
DENVER, CO

Loan Amount: $2,520,000
Loan Type: Purchase
Property Type: Assisted Living
Loan-To-Value: 59%
Term: 12 Months

San Diego hard money lender
LOS ANGELES, CA

Loan Amount: $10,675,000
Loan Type: Refinance
Property Type: Parking Structure/Retail
Loan-To-Value: 52%
Term: 12 Months

Hard Money Lenders nationwide
LAKE OSWEGO, OR

Loan Amount: $1,500,000
Loan Type: Purchase (Blanket)
Property Type: Single-Family
Loan-To-Value: 61%
Term: 12 Months

Submit a loan application

Partner with a direct lender you can trust.

FAQs – 1031 Exchange (Like-Kind Exchanges) – IRS Guidelines

Real estate investors who own investment and business property may qualify for a Section 1031 exchange. The 1031 exchange guidelines pertain to Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, and trusts.

With a Section 1031 exchange, there must be an exchange of properties. The simplest type of Section 1031 exchange is a simultaneous swap of one property for another. A real estate owner will sell one business or investment property and use the proceeds of the sale to purchase another similar property within the required timeline established by the IRS.

Both the property that you sell and the new property you purchase must meet certain requirements. Both properties must be used for business or for investment. Property used primarily for personal use, like a primary residence or vacation home, do not qualify for a 1031 exchange. Both properties must qualify as “like-kind.” Like-kind property is property of the same nature, character or class. Most real estate properties are considered to be like-kind to other real estate. For example, if an investor sells a 4-unit home and purchases a large apartment building, those properties are still considered like-kind as both properties are classified as investment real estate. Land may also be considered “like-kind” with other real estate property types such as apartment buildings and SFRs.

While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable. These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters.

The first limit

You have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.

Replacement properties must be clearly described in the written identification. In the case of real estate, this means a legal description, street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified.

The second limit

The replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.

Call Now ButtonCall Now